2012 ship-operating costs up 2.1%

Thursday, September 27, 2012

Total annual operating costs in the shipping industry increased by an average 2.1 percent in 2011 compared to 2.2 percent in 2010, according to the accountant and shipping consultant Moore Stephens.
It said crew costs were the main reason for the overall increase in 2011, while the cost of insurance fell for the second year in a row.
Moore Stephens partner Richard Greiner said his firm's OpCost 2012 report "contains both
good and bad news for the shipping industry. The bad news is that costs
continue to rise. The good news is that costs are not rising as fast,
or as steeply, as they were three or four years ago, and are in fact
pretty much in line with predictions."
Containership
operating costs were up 3.1 percent, while bulker and tanker operating costs
increased 1.7 percent.
There was a 3.3 percent overall increase in 2011 crew costs, which Moore Stephens was "marginally down" compared to the increase in 2010 and much smaller than the spike in 2008 of 21 percent.
"This may be a reflection of the
economic climate, and a consequence of more companies going out of
business and more ships going into lay-up," Greiner said. "But while crew costs remain
the single biggest contributor to higher operating costs, they are still
modest in comparison to some of the hefty increases posted in earlier
years. Investing in good people is a must for the shipping industry, and
will justify the price tag in the long term."
In other operating cost categories:

Repairs and maintenance costs for all types of ships fell 1.1 percent, compared to the 4.5 percent increase in 2010. However, containership repairs and maintenance costs rose an average of 3.7 percent last year, with costs rising faster on larger box ships.

Cost of stores rose 2.7 percent, following two years of declines. Greiner said this was "no surprise since the
category includes the likes of lube oils, the price of which continued
to rise throughout 2011 along with the price of crude oil. New
technology in lube manufacture promises to make ships more
environmentally friendly, and more efficient, but that will come at
greater financial cost."

Insurance costs for all types of ships fell 1.5 percent in 2011, following a 4.7 percent fall in 2010. Greiner said the decline was "not a surprise but an anomaly, given the economic climate and the pure underwriting figures for recent years. In a classic underwriting market undistorted by rampant competition, rates would be going up. As it is, with very few exceptions, they are going down. One of those exceptions can be found in the container ship sector, where a 3.5 per cent increase in insurance costs for smaller box ships compares to an 0.7 per cent fall in costs for the biggest vessels. This would suggest that the age of the ship remains a greater concern for underwriters than its size, which is nothing new."

“The global economic outlook remains uncertain. Confidence in the shipping industry, while fragile, has held up remarkably well given the financial and political difficulties of recent years," Greiner said.
"Shipping will not welcome an increase in operating costs. But there should be some solace to be had from confirmation that the increases are more or less in line with predictions," he said. "In shipping, as elsewhere, it is easier in difficult times to plan for a probability than for an unexpected contingency. And better analysis and risk management makes an unexpected contingency less likely." - Chris Dupin